Why Wine Tech is so Challenging and How it Can Improve

There is a large problem with the current state of technology in the wine and beverage industry that hinders innovation across the entire supply chain, from producer to distributor to restaurant/retailer and ultimately the consumer.  It’s the reason why many tech startups in the wine, beer and spirits space have a hard time gaining traction; leaving dozens of web and mobile apps in the graveyard over the past twenty years. Whether technology at the table, such as Uncorkd, or consumer-facing apps, the problems all stem from the same place.  There are huge rewards for the companies that can change the status quo and for those that get on board with the technological advances.

What’s missing?

Wine (or beer or spirits) as a product is much like other consumer products we buy, whether toothpaste, computers or cars.  Let’s take the example of cars, which when you think about it, has many of the same complexities of wine as a consumer product.  When you are buying a car, you evaluate things such as:

  • Year (vintage)
  • Brand
  • Manufacturer (winery/producer)
  • Color
  • Style of car (grape varietal)
  • Options

The list would look very similar for other products, like computers.  There are several significant differences though in how these industries use the product data and talk to each other compared to how the wine industry does .  First is the way wine is sold in the three (and sometimes four) tier distribution system.  Unlike other industries, data doesn’t flow smoothly through the tiered distribution system.  Distributors don’t often have all the specs provided by their suppliers or importers.  Retailers or restaurants certainly don’t get many specs from their distributors, at least not in a useful format and in a way they can present it to customers.  If I wanted to find the specs on a car, I can go to the manufacturer’s website or even my local dealerships website.  Many wineries, on the other hand, don’t even have information on their own wines available.

But there’s a larger problem…

And that is the lack of standardization and structured data in the industry.  What one person calls a region, another calls a subregion.  What someone calls a country, someone calls a region.  Even the naming convention of wines varies from producer to producer (ie. what is the official name of a wine?).

There is also no unique identifier used universally across all products.  Whereas most industries use UPCs (Universal Product Codes), many bottles in the wine industry do not.  Even ones that do, often recycle the same UPC from year to year or across the portfolio, making UPCs virtually useless for a large swath of the wine universe.  Many producers don’t use SKUs, and when they do, the producer’s SKU doesn’t make it’s way to the retailer level, because a retailer orders based on a distributor’s unique number.  And with hundreds of distributors across the country and hundreds of geographical markets, we’re dealing with producer SKUs, supplier SKUs, Distributor SKUs, and retailer SKUs, which are rarely harmonized.

So recapping the problems:

  1. There is no way to uniquely identify wines from one another
  2. There is no common language by which to evaluate wine
  3. There is a lot of data that just doesn’t exist for many wines, at least in a structured, digital format.

How these problems affect technology

Software, whether for inventory, ordering, or leaving a review of your favorite wine, needs a way to uniquely identify each product.  So what has occurred is that tech companies develop their own way to uniquely identify wines, at least the successful ones.  The issue is that how Uncorkd uniquely identifies wines is different than how CellarTracker identifies their wines and is different than how Delectable identifies their wines.  And that’s just on the consumer-facing side.  Not only can these apps and databases not talk to each other, more importantly, they can’t even talk to the retailer, distributor, supplier or winery systems in most cases.

As a result of all these different systems not being able to speak the same language, even though they are essentially tracking information across the same product set, there is a lot of duplicate effort going on.  Uncorkd has been successful where many other wine list apps have not, because we’ve built our own database of wines, beers and spirits.  Likewise, apps like Delectable or or Vivino are building their own databases with the same set of wines, but focused on community and user-generated reviews.  In most other consumer product industries, there are standards, open data and protocols (such as APIs) for third party systems to talk to one another.   A mobile app can talk to a retailer and know what it has in stock, can bring back reviews, show price comparisons and more.  This is not the case with wine, there are no standards, no open data nor all encompassing APIs.

Where do we go from here?

To be clear, the current state of the industry, puts up significant barriers to entry.  From a competitive standpoint, that provides a big advantage to existing players who use the lack of standardization to build walls around their product.  It even helps Uncorkd against new entrants trying to create digital wine menus, because we’ve spent years building our own beverage database and it isn’t something that is easy to do.

But at the same time, there have been very few successful web and mobile innovations in the wine industry over the last two decades.  It’s not for a lack of funding, there’s been plenty of investment; nor a lack of ideas, there’s been plenty of those too.  Aside from Cellartracker, which Eric LeVine has done a fantastic job building, and a few others, most software has been built within a walled garden.  If the industry could have real innovation, here’s some of the things we’d start to see:

  • Better education and engagement among regular wine drinkers. The lack of information makes wine feel exclusive, when it should be an enjoyable inclusive experience.
  • More online ordering and e-commerce from wine distributors
  • A deeper engagement between wine brands and consumers
  • Better search and a simplified way to find which distributor carries which wines

I can go on listing dozens of more ways that technology can make things easier for everyone in the distribution chain, but more importantly, how do we get there….  First, we need to recognize there’s a problem and agree to fix it.  Not everyone will want things to improve (remember they’re protecting their home turf), but leading producers, distributors and companies need to come together to set standards and agree on common protocols.  We have to agree to share information, whether open-sourced or commercially, but we can’t all hold on to our data fortresses we’ve built.  There is more value for end-users in systems talking collectively than there is in each system acting on its own.

The standardization and sharing of information comes with a cost.  It will take time and resources.  Wineries need to have a liaison and change agent, distributors need to be willing to move past their legacy systems and rocket science-like complexity of their pricing and data warehouse systems.  Almost 100% of Fortune 500 companies now use the cloud in some aspect, it’s time for companies in the beverage industry to be open-minded to the same.  The upfront costs now, will pave the way to a wider customer base and more revenue.  The size of the wine market has been relatively stagnant for years. Using technology is the biggest opportunity we have to grow it!

Josh Saunders